Gov. Bill Haslam conducts budget hearings at the state Capitol in Nashville in this file photo.

Photo by
Associated Press
/Times Free Press.

NASHVILLE -- Republican Gov. Bill Haslam put a top Obama administration official on notice Monday that if he doesn't get his way on a Medicaid expansion, an estimated 181,000 Tennesseans won't get coverage under the federal health care law.

The governor said in his letter to U.S. Health and Human Services Secretary Kathleen Sebelius that he must have federal approval of the special conditions he wants for his "Tennessee Plan," unveiled with great fanfare to state lawmakers eight months ago.

If they aren't, he warned, "We do not see a path forward in the current environment that will allow us to extend coverage to the Medicaid Expansion population until the aforementioned issues have been resolved and flexibility is given to allow us to address health outcomes and cost in a way that the traditional program does not."

Yet a Medicaid expert says there's a problem at the starting gate with Haslam's approach.

"The state will have serious negotiations with the federal government only after it submits a detailed waiver application to the federal government, spelling out exactly what it wants federal officials to agree to," said Gordon Bonnyman with the Tennessee Justice Center, which advocates for better health care access.

And Tennessee has not done so, Bonnyman said.

HHS spokesman Fabien Levy later said in an email that "we welcome continued conversations with Tennessee about developing a state-based solution that meets both the state's unique needs and the requires of the Medicaid program, while providing much-needed coverage to thousands of Tennesseans."

Haslam has already effectively turned down $1.4 billion in federal funds beginning Jan. 1 for the Medicaid expansion envisioned under the federal Affordable Care Act. The federal government is paying 100 percent of the costs for the first three years before gradually scaling it down to 90 percent. Medicaid in Tennessee is called TennCare.

The governor and fellow administration officials say they've spent months in talks with Sebelius or top aides on his plan to use the federal money to essentially buy newly eligible Medicaid enrollees into the online insurance marketplaces known as exchanges.

But unlike Arkansas, which won approval to do just that, Haslam is demanding flexibility to better control enrollees' behavior through charging them higher co-payments when they unnecessarily use expensive services like hospital emergency rooms or indulge in unhealthy habits like smoking.

Haslam also wants to reform provider reimbursements and reward providers for patient outcomes and quality care instead of simply paying them to perform specific services. And on another front, Haslam is questioning "wrap-around" services now required for "medically fragile" enrollees.

The governor revealed that he had written Sebelius during a speech Monday to the Nashville Rotary Club.

Last month, Sebelius said that while she and her staff have had conversations with Haslam and TennCare officials, Tennessee had yet to actually submit anything in writing. Haslam has previously said most of that had been covered in various conversations.

The governor told reporters following his speech Monday that "we think there's a lot more flexibility that they have under the law than what they've shown. So that's what we're trying to figure out."

Through a waiver agreement, the federal government waives regular Medicaid rules in decisions that can impact billions of dollars. But the complex agreements need to start with a waiver request, Bonnyman said. In fact, Bonnyman said Arkansas, Iowa and Ohio submitted their waiver requests months ago. Arkansas' was approved while other states remain in "intense negotiations" about details, Bonnyman said.

While the governor has now fired off a two-page letter to Sebelius, Tennessee still hasn't submitted a waiver, which can run into hundreds of pages, Bonnyman pointed out.

"Tenncare certainly knows how to submit a waiver application because it has done so many times over the past 20 years," Bonnyman noted. "Until Tennessee puts a concrete, detailed proposal on the table, we cannot expect these discussions to go anywhere."

Haslam has previously conceded he has "a very difficult needle to thread" in developing a plan that can pass muster with fellow Republicans in the Legislature and Democratic President Barack Obama's administration.

He said he also worries about future impacts of the expansion on the state's budget, repeating earlier concerns that federal budget issues could prompt cutbacks in Uncle Sam's share of the costs. It's a "legitimate concern," he said.

At the same time, minority Democrats in the Legislature continue to pound away at Haslam's delay, blaming recent layoffs at hospitals on what they see as the governor's continued dithering some eight months after announcing his "Tennessee Plan."

Last week, House Democratic Caucus Chairman Mike Turner of Nashville charged "there has never been an easier way for the state of Tennessee to improve the lives of its citizens without having to spend a single dime in state funds for years to come."